TSMC inks development deal to bring $12 billion factory to Phoenix

TSMC predicts record high Q4 revenue because of iPhone 12 launch.
Image: TSMC

Taiwanese Semiconductor Manufacturing Company (TSMC) made an agreement with the City of Phoenix to establish its $12 billion state-of-the-art chip factory in the area. As part of the deal, the local government will spend over $200 million to improve its infrastructure.

The firm said its new Arizona-based facility would create 1,900 new full-time jobs over five years. The chipmaker previously indicated it intends for the complex to commence operations in 2024.

TSMC’s new Agreement with Phoenix Officials

In May, TSMC announced it would build a cutting-edge plant in the Copper State after meeting with federal and state officials. The firm determined the Silicon Desert should house its new 5nm factory after securing massive infrastructure upgrade commitments.

Phoenix will reportedly spend $61 million on three new streets, $37 million on improving its water infrastructure, and $107 million on a wastewater management initiative.

In return for its investment, local leaders will bring a lot of new economic activity to the city. Its most significant contribution will be the infusion of new jobs and tax revenue. That said, the chipmaker recently announced it would allocate $3.5 billion to establish a subsidiary in Arizona.

In addition, TSMC said it hopes to convince its suppliers to build facilities in the region.

The company has not yet selected an exact building site for its new foundry. But the firm is expected to complete its due diligence and sign a formal agreement before year’s end. The manufacturer expects to begin constructing its U.S. complex in early 2021.

The Origin of the Silicon Desert

Phoenix did not get the nickname “Silicon Desert” incidentally.

The municipality’s officials worked hard to establish it as a southwestern counterpart to Silicon Valley in the last few decades. That meant fostering conditions that would attract the semiconductor companies that made the San Francisco Bay Area a global technology hub. Local leaders’ efforts paid off as the chip industry’s leading lights chose to build new production capacity in Phoenix.

In 2011, Intel started building a production network called Fab 42 in Chandler, a Phoenix suburb. The chipmaker chose to build the facility, which connects three different labs in the region, thanks to robust tax incentives.

Intel also likely found the community’s large talent pool and affordable cost of living highly appealing. In fact, the firm likes the Phoenix metro area so much, it has brought 12,000 new jobs there since 2005.

Microchip Technology understood the region’s positive qualities long before its contemporaries. The microcontroller giant, incorporated in 1989, is headquartered in Chandler and operates a wafer fab in nearby Tempe. The firm’s presence put the area on the map as a semiconductor industry font years ago and still contributes to its local economy today.

Important Takeaway from the Silicon Desert

Phoenix’s evolution into the Silicon Desert should serve as a lesson to politicians worldwide; semiconductor companies can help communities thrive. Recent global events have created an opportunity for state and city administrators to put that lesson into practice.

Following the U.S.-China trade war and coronavirus pandemic, the global electronic components supply chain has entered a period of realignment. Enterprising politicians in Ireland and Taiwan have recently capitalized on the situation to unlock their economic potential. Phoenix’s officials did the same thing by impressing TSMC’s executives.

Hopefully, other regional leaders will follow in their footsteps in the near future.

The post-pandemic digitalization wave has cultivated conditions necessary to forge a more connected and opportunity-rich society. But to produce the best possible outcome for the world, the semiconductor sector will need public support to develop the technology the future needs.


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